If reshoring’s happening, where does the US get the capital goods?
Noah Smith asserts in a commentary republished January 27 by Asia Times that “reshoring US industry is possible and happening.” His argument is based on egregious misrepresentation of the facts.
Some of his misstatements depend on cherry-picking the date range – for example, a chart that shows battery production up 20% since 2018. But US battery production is down 20% from 2014, if one looks at a long-term chart (below). That’s not a success story. Never mind that overall manufacturing production peaked at 106 on the Federal Reserve index in 2007 and now stands at just 99.
When the Biden Administration announced its CHIPS Act subsidies – which Smith hails as a great leap forward for American manufacturing – the rush to build chip fabrication plants ran into shortages of labor and materials. The Producer Price Index for new plant construction rose by 37% in a single year, an utterly unprecedented event. At the same time, the number of unfilled construction jobs nearly doubled.
Smith is elated that US solar panel manufacturing capacity reached 27,000 megawatts in 2024, allowing that the US is “still way behind China.” How far behind? Smith doesn’t say. I will: China can produce 890,000 megawatts of solar panels – 33 times the US figure.
The elephantine omission in Smith’s panegyric to US industry is America’s overwhelming dependence on imported capital goods – goods that produce other goods.
US imports of capital goods at $1.1 trillion a year are nearly three times domestic orders for capital goods at just $400 billion annualized. Both numbers are deflated to January 2000 using the government’s price indices for cap goods imports and private capital equipment, respectively. Both series exclude autos. Whatever the US is